Royal Bank of Canada Misses Profit Estimates; Revenues Rise

Shares of Royal Bank of Canada (NYSE: RY – $64.94) are falling today as fiscal fourth-quarter earnings fell 2% from a year earlier, missing expectations due to higher provisions in the energy sector. Toronto-based RBC, Canada’s largest lender by assets, said that earnings were hurt by declines in capital markets and retail banking, as well as rising costs, which overshadowed gains from its wealth-management and insurance businesses. Revenue of C$9.27 billion, however, was up from C$8.02 billion a year earlier. For the year as a whole, the bank said earnings rose 4% to a record level, reflecting significant investment across all businesses despite a challenging operating environment. Adjusted to exclude items, earnings for the quarter came in at US$1.65 a share, falling short of the US$1.72 analysts expected. Also hurting RBC this quarter was an increase in its total gross impaired loans, up almost 71% from a year earlier due to higher impaired oil and gas loans in its capital-markets division and the inclusion of City National Corp., the Los Angeles-based bank and wealth management company it acquired last year. Canada continues to be pressured by a prolonged slump in oil prices, pushing producers in the energy sector to pare spending and cut staff.

Despite the pullback, the shares are trading close their 52-week high set earlier in the week. The dividend is well above the market mean at 3.73%, and the shares can be held in a well-diversified income account for further long-term growth.